Just back from China, where I saw a television interview with Jack Ma of Alibaba. He never fails to impress the hell out of me and every time I see him and my first thought is BUY.
But then when I think about all the harm Alibaba has caused to so many Western SMEs I change my mind about calling my broker/brother. Alibaba makes the naive think China sourcing is easy. I realize blaming Alibaba for the mistakes companies make in using its site is not completely fair, but at the same time, I do not see much use for the site beyond its serving as a directory of potential manufacturers of particular products.
Turns out I have company.
The China Game Blog [no longer exists], just came out with a post where questioning Alibaba’s value and positing that its usefulness has declined and will continue to do so. Midler has this to say about Alibaba’s value to product buyers:
Alibaba.com is a website that provides information on China manufacturers (Yahoo! owns a 39% stake). The website serves as a kind of directory. Consider it a Yellow Page for prospective importers. Those who say that website is a great business model emphasize the company’s first-mover advantage. Many also get excited about this being a “B2B play” — the phrase is so “2000,” but never mind that part. My lack of enthusiasm for the IPO has more to do with many uninspired experiences with the company’s website. To be frank, I just don’t get it. Aren’t the best China supplier relationships those where the supplier and buyer are known to each other, where the two have an on-going work relationship? Established players have little use for the website after the relationship is in play, and it’s hard to imagine that, for example, Mattel, ever used Alibaba.com (its supplier relationships predate the Internet).
Midler goes on to say that though Alibaba has some value to fledgling Chinese factories looking for buyers, this is a consolidating market:
If the website has any value at all, it’s in enabling fledgling factories to find would-be buyers. If you believe there is value in such a proposition, let’s reference all of those financial analysts reports that suggest the industry is rapidly consolidating. It would be one thing if factories were like single people — dating websites enjoy a steady stream of new single customers — but manufacturing is not the same. In the long run (or sooner?), all capable manufacturers are known to the market. The website works best in a world with murky market data. We are heading away from that world, not towards it. There are already websites that allow companies to list information for free and Chinese are using these sites with greater frequency.
Despite all this, Midler has “no doubt” Alibaba’s upcoming “IPO will come out strong” because it involves both China and the internet. Throw in a few more Jack Ma TV interviews and it seems Alibaba’s stock will be unstoppable.
In the short term anyway.